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Tweak in Rules Now Permits Export of Small Arms from India with Due Permission

Top small arms manufacturers from across the globe are looking to set up shop in India with a critical tweak in rules by the government that has enabled the private sector to set up manufacturing units and even cater to export orders after due permissions.

The revised Arms Rules 2016, which have been notified by the government last month, have brought clarity to the sector, giving clear rules on how private players can set up shop, bring in foreign investment and sell small arms.

Till now, only state owned public sector units were manufacturing arms for the Indian forces. With a massive requirement stretching across the three armed forces, paramilitary forces and state police, a large quantity of small arms like rifles, carbines and side arms were being imported annually.

“These revised rules will disperse the clouds of ambiguity that had engulfed the Small Arms and ammunition manufacturing sector thereby enabling the private sector to not only help meet domestic demand but enter the regional export market in a significant manner,” says Ankur Gupta, Vice President at EY India.

In a recent tweak in FDI rules, the government for the first time brought in small arms under the defence ambit. This has opened the way for an automatic route for FDI investments up to 49 per cent in the sector.

Industry insiders say that several top manufacturers, like Colt, Heckler and Kotch and IWI are in advanced talks with Indian players to set up facilities after the recent tweak. As per the notified rules, Indian companies will be granted a seven year license after due vetting and will be allowed to set up units in special economic zones. No facility will be allowed to come up near border areas.

The arms manufactured will also be “allowed for export subject to the approval of the Ministry of Home Affairs in consultation with the Ministry of External Affairs, Ministry of Defence and Ministry of Commerce, on a case to case basis”. While industry experts have welcomed the move, they have cautioned that some processes will need to be smoothened out to encourage manufacturing.

“On the flip side, the licensing process is under the MHA and approvals are required even for importing machinery. This will take time to evolve and companies could face delays in the short term,” Gupta said.